Demystifying the magical pricing potion
30 November 2011
You may not know it, but the grandfather that is today’s hotel industry room rate optimization technology just celebrated an anniversary – and a big one at that. Fifty-nine years ago this month, UNIVAC (Universal Automatic Computer), the 16,000 lb, 500 vacuum tube-equipped behemoth performed the unthinkable: it correctly predicted in an early call the 1952 president election of republican Dwight Eisenhower with a less than one percent margin of error in the electoral vote count and an equally slim three percent error in the popular vote. CBS News at the time, fearing the computer’s error, refused to announce the results. It preferred to rely on its experts’ gut instinct.
The “Electronic Brain’s” Hotel Career Shift
If UNIVAC could have, it would have checked itself into a luxury hotel and then laughed itself off to the proverbial bank. The stunning prediction marked the first time a computer accurately predicted an election. By 1956, a host of so-called “electronic brains” were putting their thinking caps on to again make that early call. As the saying goes, in terms of computerized election prediction, the rest was history.
So of course, this little story begs the question, “What does all this have to do with hotels, revenue managers, and pricing systems?”
The answer is simple – and comes without vacuum tubes. Just like the technology, software and algorithms that went into UNIVAC, so too does a carefully attuned calculus comprised of today’s modern rate optimization systems. In other words, pricing a hotel room rate fairly, one that is both reasonable for the customer and for a revenue manager’s bottom line shouldn’t be rocket science, nor should it require a magic wand or an apothecary’s potion. Like successful election predictions, various intelligence-specific factors are taken into account.
